Key Point of President's Regular Press Conference
Key Point of President's Regular Press Conference
February 2014 Regular Press Conference : President Mizuno's Message
February 27, 2014
Chubu Electric Power Co.,Inc.
- First, I would like to offer my sympathies to everyone who was affected by the heavy snowfall occurring from the 14th of this month, an event that has resulted in extensive damage across a broad area from northern to eastern Japan.
- I must also apologize sincerely to customers in areas that experienced power outages due to the heavy snows.
- Today I will be discussing the following two matters:
- Investment participation in the U.S. Freeport LNG project, and
- The status of electricity supply and demand this winter up to the present
Investment participation in the U.S. Freeport LNG project
(Investment participation in a liquefaction project)
- To begin, I will discuss our investment participation in the U.S. Freeport LNG project.
- We have decided to invest, together with Osaka Gas, in a liquefaction project that forms part of the Freeport LNG project being conducted in Texas in the United States.
- The Freeport project involves the construction of three liquefaction trains that will process natural gas into LNG, and putting existing LNG receiving terminals in Texas to use in conducting LNG exports.
- In July 2012, together with Osaka Gas, we concluded a liquefaction contract with a subsidiary of Freeport LNG Development, L.P., acquiring rights to 4.4 million tons of LNG per year, the full output of the first liquefaction train. We will commence procuring this LNG from 2018.
- This new decision will see us investing a total of approximately 600 million U.S. dollars, approximately 60 billion Japanese yen, in the subsidiary of Freeport LNG responsible for the construction and operation of the first liquefaction train over the construction period of around four years, acquiring a 25% equity interest.
- Osaka Gas is making the same level of investment, and together we will acquire a 50% equity interest in the liquefaction train.
- With this investment, Chubu Electric Power and Osaka Gas will be directly involved in the construction and operation of the liquefaction train, enabling us to both ensure that the project is solidly launched and to expand our LNG business.
- Both Chubu Electric Power and Osaka Gas are also considering dispatching staff to be involved in the construction and operation of the liquefaction train in order to play a more active role in the liquefaction project.
- We are consulting with Nippon Export and Investment Insurance regarding the use of overseas investment insurance in conducting the investment.
We are also proceeding with discussions related to the provision of financing for the liquefaction project, which also involve support initiatives on the part of public agencies.
- At present, the Federal Energy Regulatory Commission is proceeding with review procedures towards the granting of construction approval for the Freeport project.
Following the granting of approval, in fall this year Freeport LNG will make a determination regarding the final investment necessary for the liquefaction train, and commence its construction.
(The significance of the Freeport Project)
- While you are no doubt familiar with the ground I will cover, I would like to discuss the significance of involvement in the Freeport project for Chubu Electric Power.
- As a company that uses a high proportion of LNG in power generation, the procurement of LNG is one of our major considerations. We believe that the Freeport project will increase stability, cost-effectiveness, and flexibility in this area, thus enhancing our ability to procure fuel.
- Making the U.S. a new source of LNG enables us to diversify our sources of supply, thus increasing the stability of supply.
- Asian LNG markets are mainly linked to crude oil prices. By becoming an LNG producer, we will be able to introduce a new indicator – linkage to U. S. gas prices – enabling us to promote reform in the markets.
- The procurement of LNG with no restrictions on destination will make it possible for us to adjust the quantity we procure in response to fluctuations in supply and demand, significantly increasing flexibility.
(The procurement process for U.S. LNG)
- In order to bring LNG from the Freeport terminal in the U.S. to our terminal, we must
- Procure natural gas, the raw material, in the U.S. gas market,
- Convey that gas to the Freeport terminal via pipeline,
- Liquefy the gas in the newly constructed liquefaction train, and
- Transport the LNG to Japan in LNG container ships
- Our investment initiative corresponds to the third of these items , and will enable us to increase the certainty of the gas liquefaction and LNG production process.
- Arrangements for the procurement of natural gas in the U.S. and its transportation to the Freeport terminal are being pushed ahead chiefly by a company we established in Houston in October last year.
- For maritime transport of the LNG, we are considering the procurement of up to five high-performance LNG container ships fitted with the latest technologies.
We are also seeking to realize further efficiency, reviewing the possibility of the joint operation of container ships with Osaka Gas.
- We hope, by acquiring stakes in U.S. gas fields in the future, to also participate in gas production, meaning that we would be involved in all processes related to U.S. LNG.
- We believe that our acquisition of LNG produced in the U.S. will not only contribute to stable procurement of LNG by Japan, but will also represent an opportunity to reform Asia’s LNG markets.
- While our immediate revenue and expenditure situation is severe, we have thoroughly assessed the profitability of this project and are engaging in comprehensive risk management. We intend to proceed even more vigorously with this project to enable us to securely introduce LNG produced in the U.S.
Status of electricity supply and demand for this winter
- I will move on to the status of supply and demand for this winter, up to the present.
(Thanks for energy conservation)
- I want to thank our customers for their cooperation with energy conservation efforts, which have continued again this winter.
- This winter, there were some days that looked very severe in terms of the reserve margin, but we have been able to provide a stable supply of electricity. This is thanks to the energy conservation efforts of our residential and corporate customers, who have been conscientiously turning down the temperature on their air conditioning and turning off unneeded lights.
- The period requested for energy conservation by the national government lasts until March 31. With apologies for the trouble to our customers, we ask that energy conservation efforts be continued within reasonable bounds.
(Electric power supply and demand results for this winter)
- Now I would like to talk about supply and demand results for this winter to date.
- We estimated the peak load for Chubu Electric Power this winter to be 22.67 GW for the maximum power three-day average and 23.55 GW for the one-time peak load (announced October 1, 2013).
- This winter's actual peak load results from December 2013 to February 26, 2014 were 23.09 GW for the maximum power three-day average and 23.65 GW for the one-time peak load.
- As a result, the maximum power three-day average was 420 MW higher than the initial forecast and the one-time peak load was 0.1 GW higher.
- We believe that the main reasons for this include the fact that snow fell and temperatures were low in Nagoya on some of the days on which the maximum power three-day average was recorded and production was steady among our industrial customers.
- With regard to the effects of energy conservation,
- The period for energy conservation as stipulated by the government extends until March, and
- We have not yet completed an analysis and evaluation of factors such as the effect of the state of the economy.
We will report again as soon as we have completed a detailed analysis.
(Provision of power to other companies)
- To conclude, I will look at power interchanges with other companies.
- Chubu Electric Power has also received requests from other power companies that are anticipating supply shortages, and we have implemented interchanges with them.
- Specifically, in the period of peak demand for weekdays (9:00-10:00 AM), we supplied Kansai Electric Power with a maximum of 1,300MW and Kyushu Electric Power with a maximum of 610MW.
- We are committed to doing everything we can in the continuing effort to provide our customers with a stable supply of electric power.
- That concludes my remarks for today.